Buying in Melbourne
Consistently voted the friendliest and most livable city in the world, Australia’s ‘capital of cool’ boasts a buoyant property market with no signs of letting up any time soon.
Widely regarded as Australia’s culture capital, Melbourne more than matches Sydney for offering the best of all worlds. Like its arch-rival a major commercial hub for the region, it’s also a cosmopolitan meeting place of beachside chic and inner-city sophistication, boasting thriving arts, fashion, food and sporting scenes alongside a colourful history and architecture both quaint and cutting edge. Generally considered to have a more ‘European’ feel than Sydney, it’s consistently ranked in the top 10 in international desirable-lifestyle surveys, including the illustrious Economist Intelligence Unit’s livability survey of 140 cities. Is it any wonder, then, that the second-most-populous city in Australia is seen as a sound bet for foreign property investors?
‘The Melbourne property market has been a sellers’ market over the last few years although, admittedly, much of its upward movement has been in catch-up to the slow period between 2008 and 2012 caused by the global financial crisis,’ says Ken Jacobs, whose real estate group is Christie’s International Real Estate’s exclusive affiliate in Australia. Jacobs adds that, historically, Melbourne real estate has been a stable market showing steady upward movement. ‘The only risk at the moment is that there may be plateauing but a decline is unlikely,’ he says.
Toby Yates of Melbourne-based property consultants Michael L Yates & Co agrees. ‘The Melbourne market is not in a bubble and will continue to grow, although perhaps not as rapidly as it has in the last couple of years. In general, the Australian property market, particularly in Melbourne and Sydney, has seen a very strong Asian presence of late, with investors seeking the security of property ownership as opposed to the restrictions to own freehold property they face in Asia, alongside all the desirable features that Australia offers in terms of lifestyle, political stability, infrastructure and so on.’
According to Bree van Deventer of Melbourne Sotheby’s International Realty, property in the city’s blue-chip suburbs, such as its eastern neighbourhoods, is especially robust given the large influx of overseas purchasers. ‘The specific areas that are of greatest appeal to foreigners are St Kilda Road, which forms one of the city’s major spines, and the Melbourne CBD, which offers many luxury apartments with good transport access. South Yarra and Toorak, both located in close proximity to the city, also have good access to public transport and the M1 freeway,’ she says, adding that a two-bedroom freestanding home in either of these suburbs would cost anywhere from AU$1,5 million (approximately R14 million) to AU$3 million (in excess of R28 million), with a four to five per cent gross rental return.
Yates concurs: ‘The city and its fringe areas, as well as those suburbs close to good schools, are always popular. Toorak, Malvern, Hawthorn, Armadale, South Yarra, Kew, Balwyn, Brighton, Albert Park and Glen Iris all have great access to schools, public transport, parks and restaurants, and are within 15 kilometres of the CBD.’
Buying as a Foreigner
‘The Australian Foreign Investment Review Board (FIRB) guidelines prevent non-residents from buying established (‘‘second-hand’’) properties. However, 50 per cent of new-build apartment developments can be sold to non-residents or short-term visa holders,’ says Jacobs, explaining that, in essence, foreign non-residents can invest in Australian real estate only if that investment is deemed to add to the country’s existing housing stock. ‘This generally occurs by acquiring new dwellings, off-the-plan properties under construction or yet to be built, or vacant land for development.’
According to the FIRB guidelines, temporary Australian residents (those in possession of a temporary residence visa which permits them to stay in the country for a continuous period of more than 12 months) are entitled to buy one established dwelling only to live in – in other words, temporary residents are not permitted to buy established dwellings as investment properties. They can, however, buy new dwellings or vacant land to build new dwellings for such purposes, because these latter purchases increase the available housing stock in Australia.
The purchasing process doesn’t differ markedly from that in South Africa, with, among other things, the vendor paying the agent’s commission. Yates explains that transaction costs include a solicitor’s conveyancing fee, which is usually calculated according to the property value. ‘There are also stamp-duty costs on purchasing a property in Melbourne, which is a percentage of the value of the property, so, on a AU$1million property, stamp duty would cost AU$55 000, and on a AU$2million property, it would be AU$110 000, and so on. There’s also an additional three per cent charge for foreign investors – a new government charge.’
- The Australian High Commission in South Africa: southafrica.embassy.gov.au
- The Australian Government Foreign Investment Review Board: firb.gov.au
- Ken Jacobs (an affiliate of Christie’s International Real Estate): kenjacobs.com.au
- Melbourne Sotheby’s International Realty: melbournesothebysrealty.com
- Michael L Yates & Co: yatescollection.com.au
Text: Jocelyn Warrington
Photographs: iStock, Supplied